In 2024, Southeastern Europe witnessed unprecedented volatility in wholesale electricity prices, with day-ahead rates frequently surpassing €400/MWh and peaking near €1,000/MWh. This surge is not merely a temporary spike but indicative of a long-standing structural imbalance within the regional power system, developed over more than a decade. Countries such as Hungary, Romania, Bulgaria, and Serbia have been particularly affected, revealing critical vulnerabilities in their energy markets.
Recent analyses indicate that Southeastern Europe has shifted from being a peripheral segment of the Central European electricity market to a structurally constrained region. Here, price formation is heavily influenced by marginal scarcity pricing during periods of high demand, particularly when hydrological and thermal stress coincide. Unlike more resilient markets in Western or Nordic Europe, which benefit from redundant generation and transmission capabilities, this region operates with minimal buffers on both supply and network fronts.
The generation mix in Southeastern Europe is at the heart of the issue. A significant reliance on aging thermal assets, particularly lignite and coal plants nearing the end of their operational lifespan, coupled with hydropower systems vulnerable to climatic fluctuations, has exacerbated the situation. The summer of 2024 was marked by extended heatwaves that coincided with low hydrological inflows, drastically reducing hydroelectric availability just as cooling demands surged. Compounding these challenges were maintenance backlogs and stringent environmental regulations that limited thermal generation capacity.
Simulations reveal that even minor deficits in generation can lead to drastic price increases. For instance, an incremental shortfall of around 600 MW during peak hours in Hungary was sufficient to escalate prices from already high levels into extreme ranges. This sensitivity underscores a system operating perilously close to its capacity limits; any loss of significant generation units or constraints on imports can trigger widespread scarcity pricing across interconnected markets.
Traditionally viewed as a buffer against price volatility, import capacity has become increasingly unreliable due to simultaneous shortages in neighboring markets. During critical demand peaks in 2024, Central Europe faced its own tight conditions, limiting export opportunities to Southeastern Europe precisely when they were most needed. Consequently, market coupling did not alleviate price pressures but instead facilitated the spread of scarcity across borders.
Network limitations further exacerbate these issues. Despite formal integration into the Single Day-Ahead Coupling framework, effective transmission capacities often fall short of nominal levels due to congestion management practices and operational constraints. This can lead to counterintuitive scenarios where high-price zones export power while adjacent areas import at elevated rates—an outcome consistent with constrained network optimization.
Expanding generation capacity alone will not suffice to rectify these challenges unless new installations are both substantial and strategically relevant. For example, adding 3 GW of new capacity would not have normalized prices during the stress events of 2024. This finding challenges prevailing assumptions that incremental renewable energy additions will automatically ease price pressures; in reality, new capacity that cannot be deployed effectively during peak times may merely displace other generation during off-peak hours.
The rapid deployment of solar energy technologies across Romania, Bulgaria, and Serbia illustrates this point. Although photovoltaic capacity has increased significantly, summer price spikes occurred during late afternoons when solar output declines but demand remains high. Without adequate firming resources or storage solutions, additional solar capacity does little to mitigate peak demand issues and may heighten intraday price volatility.
While market power has been suggested as a potential driver behind extreme prices, quantitative assessments indicate that its influence is secondary. Price caps linked to inefficient fossil fuel production costs keep peak prices elevated regardless of bidding strategies. Thus, scarcity pricing emerges primarily from insufficient marginal capacity to meet demand under constrained conditions; even competitive markets would see extreme clearing prices under such circumstances.
The implications for stakeholders across the region are significant. As Southeastern Europe navigates this landscape of high electricity prices driven by structural inadequacies rather than mere fuel costs, the marginal price is increasingly defined by the value of lost load in a system operating near its limits. This shift has profound consequences for industrial competitiveness and long-term power purchase agreements.
In response to ongoing price volatility, industrial consumers are adjusting their operational strategies through measures such as load shifting and self-generation. However, while these adaptations may be rational at an individual level, they do little to address systemic adequacy challenges and could reduce overall predictability if implemented without coordination.
From an infrastructure standpoint, coordinated investments across three key dimensions are essential: enhancing dispatchable generation capacity for scarcity periods; increasing effective cross-border transmission capacities while eliminating structural bottlenecks; and integrating flexibility resources like storage and demand response at scale to reshape load profiles and alleviate peak stress.
If such coordinated actions are not undertaken, Southeastern Europe risks entrenching itself in a persistent high-price environment characterized by extreme fluctuations during adverse weather or fuel availability conditions. In this scenario, price volatility could become a permanent feature rather than a temporary anomaly affecting investment decisions across energy-intensive sectors vital to the region’s economy.
The events surrounding electricity prices in 2024 highlight not a failure of market mechanisms but rather a significant design gap within the system itself. While market coupling effectively transmits signals of scarcity, it does not generate them. The critical challenge now lies in whether these signals will prompt necessary investments in adequacy and resilience within the energy network or if extreme pricing will become an enduring reality during periods of stress.
